The race for Hutch stake !

[KumaarShah 143]

Hutch cup final: Vodafone takes on RCL

TIMES NEWS NETWORK

[ SATURDAY, DECEMBER 23, 2006 01:32:17 AM]

LONDON/MUMBAI: Let’s take a Christmas break. As India-born Vodafone chief executive Arun Sarin, with the backing of his board, prepares to take on Anil Ambani for control of Hutch-Essar’s Indian business, and probably Malaysia’s Maxis too, expectations that the company would present a bid as early as Friday went slightly off the mark. Vodafone announced that it is considering an acquisition but gave no price or details.

Vodafone’s move has spurred frenzied activity among private equity funds and strategic bidders such as Reliance Communications (RCL) and Maxis. Two separate bidding groups have formed to take on the Newbury, England-based giant and strike India’s largest takeover. RCL, India’s second-largest wireless company, New York-based Blackstone and Washington-based Carlyle, the largest US buyout fund, are part of one consortium, with the Mumbai-based company at the helm.

The other has David Bondermann’s Texas Pacific Group (TPG) once again teaming up with Maxis to make a second pitch for Hutch-Essar.

Two weeks back, the TPG-Maxis combine had seen its $13.5-billion bid being rejected by Hutchison.

TPG has the lead role in this group.

The plans of Kohlberg Kravis Roberts & Co (KKR), the legendary buyout firm, which was earlier in talks with Reliance, is not clear. Egyptian telephone firm Orascom is also believed to be sniffing around but no details could be ascertained.

The developments take the battle for Hutch Essar into a more concrete stage. After several weeks of talks and confabulations, the various bidders are now ready to put a price on the table, in one of the most keenly-watched and hotly-contested races in India, over the next 10 days or even sooner. Formal bids will be placed only after a proper due diligence is conducted.

These moves also come in the wake of India adding over six million mobile subscribers per month and the overall subscriber base likely to touch 170 million by March 2007 - more than the population of Japan and over twice that of the UK. And just over 10% of India’s population owns a mobile phone while the figure for the US is 70%, a survey by Gartner has shown. Other surveys have also shown that every person in western Europe owns a mobile phone.

Vodafone, at this stage, seems to have an edge over others as its bid will not place any constraints upon Hutchison. Under the shareholders agreement between Hutchison and Essar, the Ruia-promoted group enjoys the first right of refusal if Hutchison were to sell its stake to any of the Indian bidders.

There are no such constraints in case of a foreign buyer. Hutchison, if the price is right and in the absence of a higher offer, can sell its 67% in the company to Vodafone, thereby shutting everybody out of the race.

“Vodafone’s entry has spoiled everybody’s plans,” one of the bidders told ET. With its massive cash reserves (its 2007 cash flow is estimated at £4.7-5.2 billion) and global scale, Vodafone has the ability to swoop down and take over the company.

“The board of Vodafone is considering the acquisition of a controlling interest in Hutch Essar in India. Such a transaction would be consistent with its stated strategy of seeking selected acquisition opportunities in developing markets,” the company said in a statement.

Vodafone’s HEL buyout will not face legal hassles

KALYAN PARBAT & MANOJ GAIROLA

TIMES NEWS NETWORK

[ SATURDAY, DECEMBER 23, 2006 02:33:11 AM]

KOLKATA/NEW DELHI: UK’s VODAFONE Group may unveil a complex two-stage buyout strategy to acquire up to 74% in Hutchison Essar (HEL). The world’s largest mobile company is tipped to unveil separate offers to buy out Hutchison Telecom’s entire 67% block and a slice of Essar’s 33% holding in HEL.

Since Vodafone cannot directly own beyond 74% in HEL under present telecom FDI regulations, it is learnt to be open to an alliance with Essar as its minority partner.

Investment banking circles close to the developments in London and Hong Kong said that “three-way negotiations between Vodafone, Hutchison and Essar are at a very advanced stage”.

The British major would not face a major regulatory hurdle if it buys Hutch’s equity in HEL as it doesn’t have more than 10% stake in any telco providing services in India. Vodafone’s entry also suits Essar as it is not inclined to exiting the telecom market in India at present. Merger and acquisition laws do not allow a company to own more than 10% equity in more than one company in a circle.

But Reliance Communications (RCL) and Maxis - the other suitors for Hutch’s stake in HEL - have mobile operations in the country. Both of them will have to merge HEL with their existing operations. Therefore, they will also have to buy out Essar completely.

M&A guidelines for the merger of two telcos in a circle also envisage that the merged entity should have a subscriber base less than 67% of the total subscribers in that circle.

The combined subscriber base of Reliance and Hutch in all the circles is below this mark. Maxis also qualifies for merger with Hutch on this ground.

In an email query, ET asked the Vodafone Group if it would consider acquiring Hutchison’s 67% stake and an additional 7% from Essar to directly hold 74% in HEL. In response, Vodafone Group’s media relations director Bobby Leach said:

“I’m afraid, we can’t go into details. Note we have confirmed our interest in acquiring a controlling stake in Hutchison Essar, but we are at an early stage of the process”.

The Essar group spokesperson, when asked if Essar is open to a offloading a slice of its 33% stake in HEL in the event of a Vodafone offer said: “As a policy, we do not comment on market rumours.”

But investment banking circles close to Essar felt that “any decision would hinge on an agreement on the equity valuation of HEL. While Vodafone has valued the company at $13.5 billion, a section of the analysts are pegging HEL’s valuation at nearly $16 billion. Essar could make over $1 billion by selling 7% to Vodafone at HEL’s present valuation.”

Hutchison Telecom’s press statement on Friday said: “The company has been approached by various potentially interested parties regarding possible sale of equity interests in Hutchison Essar, but no agreement in respect of such possible sale, has been entered into up to today’s (December 22) date. On ET’s query whether Hutchison had received a stake buyout offer from Vodafone, Hutchison Telecom spokeswoman Mickey Shiu said: “We do not comment on market speculation.”

Incidentally, the Vodafone spokes- person declined to confirm whether the company would require a no-objection certificate from Bharti Airtel before announcing its bid for a controlling stake in Hutch Essar.

Vodafone holds 10% in Bharti and has a non-compete clause built into its shareholder agreement with Bharti. When contacted, a Bharti spokesperson said: “Vodafone has informed Bharti that it may make an offer for a controlling stake in Hutch Essar. Bharti awaits further developments.”

In the case of RCL, it may have to also need to rejig its business structure. The company provides CDMA mobile services on an unified access licence. Even though the licences are technology neutral, the operators have to specify the frequency band of the spectrum in which they will operate their services. Based on this, DoT plans spectrum allocation which is a scarce resource.

“A company needs to specify the frequency band in which it will operate services at the time of applying for the licence and on that basis licences are allotted. So, for CDMA players to acquire Hutch will require them to restructure their businesses in a certain way,” said Mahesh Uppal, director, Commfirst India, a telecom consulting company.

Vodafone may unveil two-step strategy for Hutch Essar stake

KALYAN PARBAT & MANOJ GAIROLA

TIMES NEWS NETWORK

[ SATURDAY, DECEMBER 23, 2006 11:26:04 AM]

KOLKATA/NEW DELHI: UK’s Vodafone group may unveil a complex two-stage buyout strategy to acquire up to 74% in Hutchison Essar (HEL). The world’s largest mobile company is tipped to unveil separate offers to buy out Hutchison Telecom’s entire 67% block and a slice of Essar’s 33% holding in HEL.

Since Vodafone cannot directly own beyond 74% in HEL under telecom FDI regulations, it is learnt to be open to an alliance with Essar as its minority partner. Investment banking circles close to the developments in London and Hong Kong said “three-way negotiations between Vodafone, Hutchison and Essar are at a very advanced stage”.

The British major would not face a major regulatory hurdle if it buys Hutch’s equity in HEL as it doesn’t have more than 10% stake in any telco providing services in India. Vodafone’s entry also suits Essar as it is not inclined to exiting the telecom market in India at present.

Merger and acquisition laws do not allow a company to own more than 10% equity in more than one company in a circle. But Reliance Communications (RCL) and Maxis — the other suitors for Hutch’s stake in HEL — have mobile operations in the country. Both of them will have to merge HEL with their existing operations. Therefore, they will also have to buy out Essar completely.

M&A guidelines for the merger of two telcos in a circle also envisage that the merged entity should have a subscriber base less than 67% of the total subscribers in that circle. The combined subscriber base of Reliance and Hutch in all the circles is below this mark. Maxis also qualify for merger with Hutch on this ground.

In an email query, ET asked the Vodafone group if it would consider acquiring Hutchison’s 67% stake and an additional 7% from Essar to directly hold 74% in HEL. In response, Vodafone group’s media relations director Bobby Leach said, “I’m afraid we can’t go into details. Note we have confirmed our interest in acquiring a controlling stake in Hutchison Essar, but we are at an early stage of the process”.

When the Essar group spokesperson was asked if it was open to offloading a slice of its 33% stake in HEL in the event of a Vodafone offer said, “As a policy, we do not comment on market rumours”.

But investment banking circles close to Essar felt, “any decision would hinge on an agreement on the equity valuation of HEL. While Vodafone has valued the company at $13.5 billion, a section of the analysts are pegging HEL’s valuation at nearly $16 billion. Essar could make over $1 billion by selling 7% to Vodafone at HEL’s present valuation”.

Hutchison Telecom’s press statement on Friday said: “The company has been approached by various potentially interested parties regarding possible sale of equity interests in Hutchison Essar, but no agreement in respect of such possible sale, has been entered into up to today’s (December 22) date.

On ET’s query whether Hutchison had received a stake buyout offer from Vodafone, Hutchison Telecom spokesperson Mickey Shiu said, “We do not comment on market speculation”. Incidentally, the Vodafone spokesperson declined to confirm whether the company would require a no-objection certificate from Bharti Airtel before announcing its bid for a controlling stake in Hutch Essar.

Vodafone holds 10% in Bharti and has a non-compete clause built into its shareholder agreement with Bharti. A Bharti spokesperson said: “Vodafone has informed Bharti that it may make an offer for a controlling stake in Hutch Essar. Bharti awaits further developments”.

In the case of RCL, it may also need to rejig its business structure. The company provides CDMA mobile services on an unified access licence. Even though the licences are technology neutral, the operators have to specify the frequency band of the spectrum in which they will operate their services. Based on this, DoT plans spectrum allocation which is a scarce resource.

“A company needs to specify the frequency band in which it will operate services at the time of applying for the licence and on that basis licences are allotted. So, for CDMA players to acquire Hutch will require them to restructure their businesses in a certain way,” said Mahesh Uppal, director, Commfirst India, a telecom consulting company.

Bharti may grant waiver to UK major for a fee

JOJI THOMAS PHILIP & RASHMI PRATAP

TIMES NEWS NETWORK

[ SATURDAY, DECEMBER 23, 2006 11:29:13 AM]

NEW DELHI/MUMBAI: Bharti Airtel is slated to waive the non-compete clause with Vodafone. While the buzz is that Bharti could charge a penalty fee for waiving the non-compete clause, senior Bharti officials say the terms of disengagement will be discussed only if Vodafone’s bid for Hutchison Essar is successful.

According to Bharti executives, the issue of what will happen to Vodafone’s 10% stake in Hutchison Essar will be discussed only after the fate of Vodafone’s bid is known. For Vodafone to buy out a controlling stake in Hutch, it will first have to free itself from the one-year non-competition clause with Airtel.

There is speculation that Vodafone has already initiated talks with Bharti Airtel and the other primary shareholder in the company, Singapore Telecom, to release it from the non-competition clause for a penalty fee, but this was refuted by Bharti officials. Unconfirmed reports say that Vodafone may sell its 10% holding to at a concessional price to Bharti or to an investor of their choice.

Bharti Airtel refused to confirm the penalty fee issue and said: “Vodafone has informed Bharti that it may make an offer for a controlling stake in Hutchison Essar Limited. Bharti awaits further developments.” Vodafone’s spokesperson, too, declined to comment on the issue.

According to government regulations, a foreign company can not hold more than 10% in more than one telco. While technically, Vodafone can reduce its stake to 9.9% in Bharti Airtel and still acquire a controlling stake in Hutch, it is highly unlikely that this is an option that Bharti Airtel chairman, Sunil Mittal, will agree to.

Meanhwile, Mr Mittal has denied that his company is in the race for Hutchison Essar. “We have no interest in Hutch,’’ Mr Mittal told ET. Still, the buzz about Bharti’s interest in Hutchison Essar refuses to totally die down. Industry analysts argue that Bharti would not like to compete with an aggressive Vodafone or indeed a strong and larger Reliance Communications, in the event of either of the two taking over Hutchison Essar.

In the likely event of Vodafone making a complete exit, Bharti Airtel may well have to re-jig its shareholding structure. It may also result in Singapore Telecom, which currently holds 33% share in Bharti, increasing its share by buying out Vodafone.

Alternatively, a new strategic investor may enter if Bharti CMD Sunil Mittal is game for bringing in a fresh player to cash in on the current high valuations in the Indian telecom sector. On Friday, Bharti’s market cap was nearly Rs 1,16,000 crore and the scrip closed at Rs. 611.45, up 0.53%.

Bharti says it is watching all developments. It has reasons to do so. While Bharat Sanchar Nigam (BSNL) is currently the number two GSM operator, Hutch is set to overtake the PSU behemoth as there is a marginal difference between their subscriber numbers and market share.

With Hutch having secured licenses to operate in the rest of the circles (it is currently in 16 circles), it’s just a matter of time before HEL gets a pan-India footprint. In addition Hutch’s ARPU (average revenue per user per month) at Rs 374 in the quarter ended September 30, is ahead of Bharti’s Rs 349.

Vodafone’s backing will only speed up HEL’s 3G roll-out after the spectrum policy is announced. By the same token, it may be a setback for Bharti in terms of technology as it will lose a strategic partner.

Link Courtesies: Economic Times.

Now what will happen? Will Vodafone get it or RCL-Maxis.[/

[GSV13 0]

It seems Vodafone from all direction!

And international players are welcome always!

[vb86 0]

Hutchison receives three bids, one EoI

NEW DELHI: Hutchison Telecommunications has received three bids and an expression of interest from a fourth player for its stake in the Indian mobile joint venture Hutch-Essar, CNBC TV18 news channel reported on Saturday.

But no official confirmation could be obtained from any of the five parties -- four potential buyers and the target company -- involved.

The channel reported that bids for HTIL's 67 per cent stake in Hutch-Essar were received from British telecom giant Vodafone, India's Reliance Communications and Malaysia's Maxis Communications, besides an EoI from Qatar Telecom.

The three bids were in the range of 16-18 billion dollars, the report quoting unnamed sources said.

Ever since Vodafone made its intent to bid for HTIL's stake public, speculation has been rife about the timing and size of the bid, with some suggesting that the deadline for submitting the bid was at 1800 hrs GMT on Friday, which passed without any official confirmation.

Vodafone, RComm silent on bids

Amid reports that Hutchison Telecommunications International Ltd (HTIL) had received three bids and an EoI for its stake in its Indian business Hutch-Essar, two of the potential bidders preferred to keep silent on the issue.

A spokesperson for British telecom major Vodafone, a contender for Hutch-Essar, said the company would not comment on speculations

[abhay 0]

War for Hutch gets expensive

The race for Hutch Essar has entered its penultimate lap with Goldman Sachs shortlisting telecom giant Vodafone, Anil Ambani's Reliance Communications, the Ruias of Essar, Maxis of Malaysia and Egypt's Orascom for Hutchison Whampoa's 67% stake in its Indian joint venture.

As reported by TOI first, Goldman is the New York-headquartered global investment bank that has been hired by Hong Kong-based hyper-billionaire Li Kashing's Hutchison to mid-wife the sale of its holding in Hutch Essar.

Although there's no word on the pecking order of the shortlist, indications are that the serious contenders are Vodafone, the world's largest mobile phone company, Anil Ambani's R-Comm and the Ruias, who by virtue of their 33% holding in Hutch Essar enjoy a certain incumbent advantage. This short-short list isn't likely to come as a surprise to too many people.

What is significant is that Goldman is believed to have indicated to Hutchison that Hutch Essar could fetch an enterprise value of $16-18 billion. Only the other day, it was $15 billion. This is beginning to look a lot like real estate prices in Malabar Hill. What this new valuation does is raise the stakes and make it that much more tempting for the Ruias to cash out. At $18bn, their one-third share would be a gravity-defying $6bn or Rs 28,000 crore plus.

It would need an enormous belief in the future of the telecom business and in their own abilities for them to turn their back on that kind of money and play for even bigger moolah some years from now.

Either that, or they should be sitting at the high tables of Las Vegas and staring impassively into the eyes of the most fabled gamblers for whom the appetite for risk and return is greater than the sum of all fears.

Not that the others in the game are playing a riskless hand. For Vodafone's global CEO Arun Sarin, it's a shot at redemption. Ever since he took over, the gap between expectation and delivery has been growing.

Obviously, he realises that he needs to be a serious player in the fastest growing telecom market in the world (Vodafone holds 5.6% in Airtel and 4.4% in Sunil Mittal's holding company Bharti Enterprises —- but that's a little like trying to dive from a 15-feet board into a 2-feet deep pool).

The question is, at what cost? Sarin is aware that raising money isn't the problem; his problem lies in convincing big shareholders that return on an investment of $18bn will be worth it. Sarin faces a stock market that takes no prisoners, where mercy is not considered a virtue.

Should this bidding war come down to the wire, chances are that it'll be Vodafone vs Reliance Comm. For Reliance, with 24 million subscribers and rising, the bid is a no-brainer.

Add to that Hutch Essar's 22 million largely high yield subscribers, and it puts R-Comm in a position of unquestioned dominance —- way ahead of Airtel's 30 million subscribers.

Strategically, it's a perfect fit. But how high is Anil Ambani willing to go? He showed his hand early in the game to scare away non-serious bidders with his 'altitude sickness strategy'. People who know him say he's very very keen on Hutch Essar, "but there's a limit beyond which is becomes a matter of ego and he won't cross that". Folks, only the seriously serious need apply from hereonafter.

http://timesofindia.indiatimes.com/NEWS/In...show/911888.cms

[HetalDP 947]

RELIANCE-HUTCH JOINT ENTITY is win-win for consumers & owners.

Imagine the wide base of customers one can call in ON NET PACK & FREE SMS IN ON NET PACK.

It could make seamless roaming in CDMA & GSM, Just like China unicom.

Possibilities are endless... but hey..so is speculation. SO keep speculating.

On Net Pack only Works for CDMA Phones, FWP and Fixed line to some Extend But Reliance Telecom Phone is not Inclusive in OnNet Plan

[abhay 0]

R-Comm routes Hutch call via SPV

Prospective bidders lining up for Hutch Essar are now finetuning their strategies for what could well be the largest acquisition in the country. Industry sources say the Anil Dhirubhai Ambani Group (ADAG) is creating a Special Purpose Vehicle (SPV) to buy Hutchison Essar. Its partners, global private equity investors Carlyle and Blackstone, will own minority in the SPV.

If this SPV gains control of Hutch Essar, it will be merged with ADAG's CDMA play, Reliance Communcation (R-Comm). CDMA is a telecom standard that R-Comm had adopted when it started out. Since then, it has made public its intentions to get into GSM, another standard in the telecom business that most players use, including Hutch Essar.

It is also learnt that private equity investors like Kohlberg Kravis Roberts (KKR) and Apax Partners are also in talks with ADAG to join hands in the bid. If the consortium comes up trumps, private equity investors will receive shares in R-Comm. Shareholders in the company are expected to gain from the valuation of the combined entity.

ADAG sources declined to comment and termed it speculative. But investment bankers said the merger will be mandatory as an operator cannot own over 10% or less than 100% in a competing circle. In a majority of the circles, including Mumbai, R-Comm competes with Hutch Essar.

At the time of going to press, news agencies reported that Vodafone, the other serious contender in the fray for Hutch Essar, is in talks with a consortium of private equity funds led by the Texas Pacific Group (TPG) to raise funds for its bid. Headed by Vivek Paul, formerly CEO of Wipro, TPG was among the original clutch of investors that lined up for battle as an R-Comm ally. That it is talking to Vodafone only adds more credence to a worn out cliche: In business there are no permanent friends or enemies, only interests.

Even as these talks go on, Vodafone has another headache to contend with: finding an Indian partner. The rules do not allow a foreign company to own more than 74% in an Indian telecom venture.

Talking about interests, sources say, TPG has opened dialogue with Maxis Communication of Malaysia. Maxis has roped in Sandip Das, former managing director at Hutch Essar. Its interests in India are restricted to two circles under the brand name Aircel, and the firm is keen to expand its business. But, it will have to find the backing of a strong private equity partner.

Then, of course, there is the Essar group to contend with which owns a 33% stake in Hutch Essar. It has roped in Bearn Stearns to raise funds. It is believed they have committed to pump upto $13 billion to fund Essar's bid. Euromax Capital is advising the Ruias.

More than anybody else, it is the Ruias who are sitting pretty. By virtue of their 33% stake in Hutch Essar, every $1 billion increase in the company's valuation, will eventually fetch them $330 million.

But investment bankers say “everthing is in a preliminary stage.” The entire process will take at least two months. Goldman Sachs, advisors to Hutchison Telecom International (HTIL), will prepare a basic information document, put a ball park number to what HTIL expects, and invite bidders. After the preliminary rounds, HTIL will open its books for the finalists to conduct due diligence.

In the telecom business, a company is valued at around eight times its earnings before depreciation, interest and tax (EBDITA). In Hutch Essar's case, at an EBDITA of $700 million, theoretically, it ought to be valued at something in the region of $5-6 billion.

Maxis, for instance, has a market capitalisation of $7 billion on an EBDITA of $1 billion. But in India, market leader Bharti Airtel is valued at $26 billion — almost 22 times its EBDITA. Given this background, Hutch Essar has now been valued at $14 billion; which many believe, is an irrational number.

Whatever the case be, in the final reckoning, whoever takes Hutch will have to pay through the nose.

http://timesofindia.indiatimes.com/NEWS/In...show/916185.cms

Edited December 25, 2006 by abhay

[HetalDP 947]

PE consortium enters race for Hutch Essar stake

TIMES NEWS NETWORK

MONDAY, DECEMBER 25, 2006 02:31:45 AM

NEW DELHI: Here’s another twist to the Hutch-Essar saga: A consortium of PE investors led by Texas Pacific, KKR and Blackstone is learnt to have entered the race for acquiring a controlling stake in Hutchison Essar, India’s third largest GSM operator.

International media reports suggest that TPG is in talks with Blackstone and Kohlberg Kravis Roberts for an independent bid. This formidable consortium of PE investors joins the five other suitors — Vodafone Group, Reliance Communications, Malaysia’s Maxis Communications, Essar group and Egypt’s Orascom, who have already expressed an interest in buying out Hutch-Essar.

If the news is true, the entry of the PE consortium can upset plans of the existing suitors. For instance, Reliance Communications is believed to have tied up with KKR and Blackstone, while Maxis is reportedly making a joint bid with Texas Pacific Group. Till now, Vodafone was emerging as the front runner with Reliance and its associates as the main rivals. “Vodafone’s size and clout gives it an edge in the bidding war,” said a source close to the deal.

With the agressive entry of Vodafone a few days back, one thing is clear: the valuation for the Hutch-Essar stake is now being pegged at much higher, in the range of $16-18bn. More, formal bids have not yet been placed with Hutch, but negotiations are on between Hutch’s relationship manager Goldman Sachs and interested bidders. “There is no concept of placing a sealed bid. All companies in the race are slated to begin negotiations with HTIL post-Christmas. It will take between 2-3 weeks before advanced negotiations with HTIL can commence,” said the spokesperson for one of the contenders.

Hutch is playing hard to get, and rightly so. In a fresh development, Hutchison Telecom International, which has a 66% stake in HEL, on Sunday said that there was no time-frame to conclude the deal. The Ruias, who hold 33% stake in HEL, are also keeping the corporate world guessing. Sources close to the Ruias said that all three options — buying out HTIL, selling out and continuing with their exisiting shareholding — were being considered. If the Ruias do exit, it will fetch them a staggering Rs 25,000 crore.

For Vodafone, it’s clearly an opportunity to enter the India market with a bang. The buyout will see India account for its third largest subscriber base after Germany and US. It will also pave the way for the UK-based telecom major to have a larger presence in the world’s fastest growing telecom market.

Link is

http://economictimes.indiatimes.com/News/N...show/916299.cms

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Texas Pacific joins $15bn fight for Indian mobile phone firm

Web posted at: 12/25/2006 0:34:27

Source ::: REUTERS

texas • Texas Pacific, the private-equity group, has joined the $15bn auction for Hutchison Essar, the Indian mobile-phone company that is also a target for Vodafone.

Hutchison Essar, the number four player in the fast-growing Indian market with 22m subscribers, is now “in play” after several weeks of discussions with Blackstone, another private-equity firm. Hutchison Telecom International, part of Hong Kong’s Hutchison Whampoa group, has sought rival offers for its Indian business, which is a joint venture with Essar, a conglomerate.

Blackstone had been working on a deal with Reliance Communications, another leading Indian mobile group. Vodafone, which is being advised by UBS, formally confirmed its interest on Friday.

Private-equity sources suggested that TPG was working on its own offer for Hutch Essar. It has also reportedly proposed a bid with Maxis, a Malaysian company.

However, late on Friday, a source familiar with the state of the negotiations said that TPG was now in talks with Blackstone and Kohlberg Kravis Roberts, another top-flight American investment group. “They are seriously looking at it,” he said.

The big private-equity groups are increasingly clubbing together to finance the multi- billion-dollar transactions that have become commonplace over the past 18 months. Blackstone and KKR previously worked together, along with Apax Partners and Permira, on last year’s $15.6bn takeover of TDC, a Danish telecoms company.

Those familiar with Hutchison’s thinking say the Hong Kong group, headed by Li Ka-shing, is not desperate to sell Hutch Essar, and will only accept a full price. Vodafone’s executives accept that a winning offer is likely to be significantly in excess of $13.5bn.

Some commentators believe that Vodafone will struggle to justify the financial logic in buying Hutch Essar, and to demonstrate that a deal could meet its self-imposed acquisition criteria. It adopted these this year, after months of disputes with shareholders over company strategy.

Vodafone has said future acquisitions must produce returns of at least two per cent more than its cost of capital. However, it will argue that its global buying power for handsets and network equipment could produce big cost savings at Hutch Essar. It is also now willing to consider network-sharing arrangements.

In addition, the undeveloped nature of the Indian mobile market offers plenty of potential for future profits. Vodafone estimates it has already made a £400m gain on its 10 per cent stake in Bharti Tele-Ventures, India’s largest mobile operator. If Vodafone decided to acquire Hutch Essar, it would have to sell the Bharti stake, bought for £820m just over a year ago, India recently overtook China as the world’s fastest-growing mobile market. However, with only 130m mobile users in a population of 1.3 billion, there remains huge potential for growth.

Vodafone is increasingly looking to emerging markets to re-ignite its growth. Its large European business is now mature — its operations in Germany, Italy and the UK all reported small declines in revenue in its most recent half-year. In addition, the strong performance of Telsim, Vodafone’s expensively acquired Turkish business, has started to assuage the doubts about the leadership of Arun Sarin, the group’s chief executive.

Those familiar with Blackstone say the firm is irritated at the public nature of the auction now taking place for Hutch Essar. In the current optimistic investment climate, this is likely to drive prices higher.

Blackstone and Reliance are understood to have asked Citigroup and UBS to help raise the $15 billion of debt to help fund the deal. However, it is thought that UBS is no longer working with Blackstone. UBS has made it clear that it regards Vodafone as one of its most important clients.

Blackstone and TPG declined to comment.

Source Link

http://www.thepeninsulaqatar.com/Display_n...06122503427.xml

Edited December 25, 2006 by hpnasik

[abhay 0]

Qatar Telecom joins with Orascom for Hutch bid

In a twist to the Hutch-Essar tale, Qatar Telecom along with Egypt's Orascom is emerging as the latest bidder in the race for stake in Hutchison Whompoa's Indian joint venture.

The others in the race are Vodafone, Anil Ambani's Reliance Communications, the Ruias of Essar and Maxis of Malaysia.

Goldman Sach, the investment banker has been hired by Hong Kong-based hyper-billionaire Li Kashing's Hutchison to mid-wife the sale of its holding in Hutch Essar.

Although there's no word on the pecking order of the shortlist, indications are that the serious contenders are Vodafone, the world's largest mobile phone company, Anil Ambani's R-Comm and the Ruias, who by virtue of their 33% holding in Hutch Essar enjoy a certain incumbent advantage. This short-short list isn't likely to come as a surprise to too many people.

What is significant is that Goldman is believed to have indicated to Hutchison that Hutch Essar could fetch an enterprise value of $16-18 billion. Only the other day, it was $15 billion. This is beginning to look a lot like real estate prices in Malabar Hill. What this new valuation does is raise the stakes and make it that much more tempting for the Ruias to cash out. At $18bn, their one-third share would be a gravity-defying $6bn or Rs 28,000 crore plus.

It would need an enormous belief in the future of the telecom business and in their own abilities for them to turn their back on that kind of money and play for even bigger moolah some years from now.

Either that or they should be sitting at the high tables of Las Vegas and staring impassively into the eyes of the most fabled gamblers for whom the appetite for risk and return is greater than the sum of all fears.

Not that the others in the game are playing a riskless hand. For Vodafone's global CEO Arun Sarin, it's a shot at redemption. Ever since he took over, the gap between expectation and delivery has been growing.

Obviously, he realises that he needs to be a serious player in the fastest growing telecom market in the world (Vodafone holds 5.6% in Airtel and 4.4% in Sunil Mittal's holding company Bharti Enterprises —- but that's a little like trying to dive from a 15-feet board into a 2-feet deep pool).

The question is, at what cost? Sarin is aware that raising money isn't the problem; his problem lies in convincing big shareholders that return on an investment of $18bn will be worth it. Sarin faces a stock market that takes no prisoners, where mercy is not considered a virtue.

Should this bidding war come down to the wire, chances are that it'll be Vodafone vs Reliance Comm. For Reliance, with 24 million subscribers and rising, the bid is a no-brainer. Add to that Hutch Essar's 22 million largely high yield subscribers, and it puts R-Comm in a position of unquestioned dominance —- way ahead of Airtel's 30 million subscribers.

Strategically, it's a perfect fit. But how high is Anil Ambani willing to go? He showed his hand early in the game to scare away non-serious bidders with his 'altitude sickness strategy'. People who know him say he's very very keen on Hutch Essar, "but there's a limit beyond which is becomes a matter of ego and he won't cross that". Folks, only the seriously serious need apply from here on after.

http://economictimes.indiatimes.com/Qatar_...show/925241.cms

India can give Vodafone its third largest market

If Vodafone acquires Hutch, India's third largest mobile operator with 22 million subscribers, India will account for its third largest customer base. The UK-based company operates in 27 markets. Germany is the largest market for Vodafone with 29 million subscribers while the US (where it has 44.4% stake in Verizon) is the second largest.

If the deal goes through, India would become the country with most potential for expansion for Vodafone, with only 11% teledensity.

Most countries where Vodafone operates currently are reaching the saturation point. Switzerland has 96% teledensity followed by Germany (80%), US (76%), France (78%), Turkey (67%) Romania (70%). The company's strategy is to concentrate its resources on emerging markets. In a statement issued earlier this month, the company states its focus will now be markets of EMAPA - eastern Europe, the Middle East, Africa, Asia Pacific and affiliates.

Vodafone's move to join the war for Hutch Essar, and in the process sell its 10% stake in Bharti Airtel, is in line with its global exit strategy. Vodafone's recent history reveals the telecom behemoth has exited markets where it did not command a leadership position, and has been shedding stake in operators where all doors to pick up controlling stake remained closed.

This month, Vodafone sold 25% in Swisscom (?1.8 billion) in Switzerland, a market with 96% saturation. In August, Vodafone sold 25% stake in Belgium's Proximus for e2 billion. Earlier, in March 2006, citing “reduced prospects for superior long-term returns”, the company sold off its Japanese unit to Softbank for about $15.5 billion. Similarly, in October 2005, Vodafone sold its 100% interest in its Swedish unit to Telenor, the pan-Nordic telecommunications operator for $1.2 billion.

At the same time, the company, last week, strengthened its position in Egypt, where it increased its stake in Vodafone Egypt from 50.1% to 55% for an estimated ?108 million.

A successful Hutch acquisition will see Vodafone acquire about 22% market share of the 100 million plus GSM space in India. More importantly, this will corroborate with Vodafone's strategy of being in the top three mobile operators wherever it operates.

Hutch is also important for Vodafone, considering the 3G roll-out in India is slated for 2007-end. Having spent over $27 billion in buying 3G licences in countries, and 40% of its capex towards 3G roll-outs and networks, Vodafone is far ahead of all its rivals.

The company, therefore, is sitting on a goldmine as its customers across the globe migrate to high-revenue 3G services like mobile TV, video and audio downloads. Hutch, which commands the highest ARPUs in India and also has the highest mix of corporate and high-end users, is best poised to tap the immense 3G potential that India offers.

http://www.agencyfaqs.com/news/stories/2006/12/25/16702.html

Huch-Essar saga

The permutations and combinations in the Hutch-Essar battle seem to be getting more and more bizzare by the day!

The latest development in the story now is that Orascom has reportedly tied up with Qatar Telecom to bid for a controlling stake in Hutchison Essar.

After quoting great controversy by being under the government’s security scanner, Orascom is now hoping that good relations between Qatar and India will help it get around the security hassles this time.

The Egyptian telecom company has been a subject of controversy with the intelligence agencies and even the Prime Minister’s Office raising national security concerns on Orascom on the grounds that it has operations in Pakistan.

Main contenders

Vodafone - British Telecom giant has gone public with intensions of mounting a bid.

Anil Ambani - Very keen on lapping up Hutch to establish firm pan India GSM presence.

PE Funds (speculated) - KKR, Blackstone, TPG believed to be aligning forces to bid for Hutch together, and not with Rel Comm or Maxis.

And now Orascom- Egyptian telecom company has reportedly tied up with Qatar Telecom to bid for a controlling stake.

However the Ruias have strongly denied any move to tie up with Orascom. “Given the fact that Orascom's security issue is pending with the PMO, the question of a tie-up with the Egyptian company does not arise,” said Essar official.

Vodofone strategy

Vodafone is having market cap of over $160 bn

Enterprise value of Hutch estimated at $17-18 bn

Hutch-Essar deal may led to 105 dilution of Vodafone equity

Vodafone has close to $4 bn on its books

All-cash deal not a worry for Vodafone given $6 bn free cash flows

Why is Hutch imp?

22 million subscriber base, third largest GSM operators in India

Highest average revenue per user among Indian telecom operators

Dominent in the lucrative Mumbai circle

One of the highest valued brand in India

Recent developments

Dec 13- Reports of Anil Ambani being interested in Hutch come out, reportedly to tie-up with top private equity funds for buy out

Dec 18- Anil Ambani- Nimesh Kampani meet over lunch

Dec 20- Reports suggest Vodafone drawing up plans for Hutch bid

Dec 21- Reports suggest Bharti may waive off 1 yr cooling period for Vodafone

Meanwhile Ruia's speculated to be raising funds for buying Hutchison's stake

Dec 22- Vodafone makes formal announcement; says board considering acquiring controlling interest in Hutch- Essar

Dec 25- Reports of speculation that pvt equity players are joining hands to go solo for a bid

Dec 26- Reports of Orascome tying up with Qatar Telecom to join the race

http://www.timesnow.tv/Huch-Essar_saga/art...show/934855.cms

Edited December 26, 2006 by abhay

[abhay 0]

Ruias may offer to buy out Hutchison

The twists and turns in this tale would put a thriller maestro operating in top form to shame. No one’s willing to say so on the record, but there are strong indications that the Ruias may just be willing to turn their backs on Rs 28,000 crore and stay in the telecom market—at least in the near to - medium term.

On Monday, the investment banking community was abuzz with speculation that Ravi Ruia might be catching a flight to Hong Kong in the next day or two. There, if the grapevine is to be believed, he’ll ask the Hutchison Whampoa brass to let the Ruias exercise first right of refusal. In other words, the Ruias will ask Hutchison to offer them its 67% stake in their joint venture, Hutch Essar, before talking to anyone else. We asked the Essar spokesperson if this was true, he declined to comment.

As reported by TOI first, Hong Kong-based hyperbillionaire Li Kashing’s Hutchison has hired New York-headquartered global investment bank Goldman Sachs to midwife the sale of its holding in Hutch Essar. Goldman has apparently shortlisted telecom giant Vodafone, Anil Ambani’s Reliance Communications, Maxis of Malaysia, Egypt’s Orascom and the Ruias themselves.

There has been much talk of the bonanza the Ruias could potentially reap if they were to sell their 33% stake in Essar. Now it seems that they’re willing to shell out much more to stay in the game. Apparently the fact that the likes of Reliance and Vodafone may be willing to pay up to $18 billion has led the Ruias to believe that there is great future value in the company, and they may make even more money by unlocking it at some point of time in the future.

Telecom industry insiders point out that if the Ruias have a majority , indeed a 100% stake in Hutch Essar , this could enable them to flip it over to another bidder at an even more handsome profit.

In any case, money to buy out Hutchison apparently won’t be a problem. With Hutch Essar valued at $18 billion, the Ruias would need to raise about $12 billion to buy out Hutchison lock, stock and barrel. There are already awed whispers within the banking community about investment bank Bear Stearns—which has put together many telecom mega mergers around the world—offering the Ruias a comfort letter to raise $13 billion. With J M Morgan and Standard Chartered also reportedly advising the Ruias on how to tie up funds, raising $12 billion—that’s about Rs 56,000 crore—may not be such an insurmountable hurdle.

Interestingly, there has long been unconfirmed speculation that the Ruia brothers have differing world views on their investment in Hutch Essar venture.

Telecom industry insiders believe that Ravi has long wanted a greater say for the Ruias in Hutch Essar, while Shashi’s stance has reportedly been that with the Hutchison team doing a good job of building value, it doesn’t make sense for the Ruias to get involved.

Bankers believe that with Hutchison now having indicated a desire to exit Hutch Essar, Shashi might be willing to trade future uncertainty for current windfall.

Especially since the Ruia brothers do not have domain expertise in the services business (their three largest companies are in steel, oil and shipping). But, according to investment bankers, Ravi is said to be of the opinion that it makes more sense to stay invested in the explosively growing telecom market at this stage. After all, a windfall can always be reaped later.

http://economictimes.indiatimes.com/Ruias_...show/930797.cms

[jusmail 0]

The Ruias sure hold all the cards. I think RelCom better go back to build GSM from the ground up.

[Sadikk 301]

RUIAS?? Just to hike price!!! Ruias cant run hutch alone as they are shipping and oil people, telecom not thier cup of tea!!

Anyways i think vodafone giving tough time to ambanis.

I want hutch to go to vodafone and apna anil bhai to declare full fledge war against them by erecting PAN india GSM network, am sure he'll get success if stuck to aam janta ka mobile service provider. Not a money ****er like HUTCH.

And we are with lil ambani with strong 10000 members to person to person advertisement. ( just give us MNP between RM CDMA & RM GSM) We are bored with all the lame handsets

[Arun 795]

Essar goes solo, springs surprise offer for Hutch

Times News Network - December 27, 2006 12:43:18

The Essar group has made a surprise offer to buy the Hutchison group’s 67% stake in Hutchison-Essar at an estimated enterprise value of $17-18 billion. The offer was made through the group’s advisors, Morgan Stanley and Bear Stearns, who met senior Hutch officials in Hong Kong on Tuesday, investment bankers familiar with the meeting told ET.

The Essar group is believed to have received funding from Morgan Stanley and Citibank. Both US-based giants are believed to have given a line of credit to Essar of about $10 billion.

Essar’s move raises the stakes in the battle for Hutch-Essar. Other prospective bidders are now left with a stark choice - either offer more than Essar or prepare to withdraw. It also means that Hutchison cannot sell its stake to an Indian bidder (read Reliance Communications) without giving Essar the right to match it. Vodafone said last week that it is interested in pursuing the acquisition of Hutch-Essar. The Essar group’s latest move means that Vodafone also will have to think carefully about its next moves.

Vishal Kampani of JM Morgan Stanley was also present at the meeting with Hutch. The Hutchison group’s response to the offer is not known. Essar group director Prashant Ruia and vice-chairman Ravi Ruia could not be contacted for their comments. An Essar group spokesperson in Mumbai declined to comment.

The Essar group does not have to buy the entire 100% stake as it already owns 33%. At a valuation of about $18 billion, the group will have to cough up $11 billion (Hutch-Essar is believed to have a debt of about $1.4 billion) for its 67% stake. The Essar group has been trying to raise money from various banks, private equity funds for the transaction for quite some time. It had held talks with Telenor of Norway, Qatar Telecom, Kuwait Telecom and other strategic players.

But with its 33% stake, the Essar group always held all the cards in this battle. It had three options before it. One, to buy Hutch’s stake; two, to sell its own holding; and three, to stay on as a partner with somebody like Vodafone.

The Essar group had been silent for the past few weeks ever since Reliance Communications, Maxis and private equity groups started showing interest in bidding for Hutchison Essar. The silence had sparked speculation that the Essar group may perhaps sell its stake or even stay on with Vodafone. Ravi Ruia’s visit to London last week only heightened the rumours.

The Mumbai-based oil-to-telecom group has the first of refusal in case Hutchison Essar decides to sell its 67% to any of the three Indian companies - the Bharti group, the Tata group and Reliance. Hutchison is free to sell its stake without offering it first to Essar in case of a foreign bidder.

Others interested in the company include Vodafone, a consortium led by Reliance Communications and comprising Blackstone and Carlyle, and a Texas Pacific-led consortium with Malaysia’s Maxis.

Talks are now on between the prospective bidders and Hutch advisor Goldman Sachs. No formal bids have been placed by anybody except Essar. The companies want to do a proper due diligence and are waiting for Hutchison to open its books.

[abhay 0]

Ruias may stay back as Orascom partner

If they decide to exit, the Orascom-Qatar Telecom combine would need to find an Indian partner.

“There are no permanent enemies in business. The Ruias may decide to remain partners in Hutch Essar with Orascom,’’ said a source.

As a matter of fact, there has been speculation that the Ruias may join hands with the Orascom-Qatar Telecom duo to make a bid for HTIL’s 67% stake, thereby becoming a majority shareholder in Hutch Essar. However, this has been vehemently denied by Essar. “Given the fact that Orascom’s security issue is pending with the PMO, the question of a tie-up with the Egyptian company does not arise,’’ said an Essar official.

If this combination decides to go ahead with the deal, it would leave Reliance Communications out in the cold. Moreover, Vodafone will also find it difficult to muscle in, since the Essar-Orascom combination already has a substantial stake in Hutch Essar.

Of course, everything hinges on the final valuation; whether the Ruias buy or sell will depend on what the bidders are willing to pay. “At the right price, everything is up for sale.

There are two clear groups in Essar — one opposing the sale and the other encouraging it. After all, Rs 25,000-crore plus is a big booty for a group which had, till not very long ago, financial institutions knocking at its door for interest repayments on loans,” says a source close to the negotiations.

Another possible reason for the tie-up between Orascom and Qatar Telecom for acquiring Hutch is that India does not consider investments from Qatar as a security threat. Qatar Investment Agency is currently considering an investment of $5 billion in energy-related projects in India. Qatar is also picking up an equity stake in the LNG terminal that had been hived off from the main Dabhol plant for about $100 million. Besides, India has invited Qatar to participate in NTPC’s Kayamkulam project in Kerala and ONGC’s upcoming petrochemical hub at Mangalore.

During his visit to India earlier this month, Orascom Telecom CEO Naguib Sawiris had said the company could bid for a controlling stake in HEL, if it were to get a green signal from the Indian government.

Mr Sawiris had also said Orascom was open to picking up a direct stake in Indian telecom companies, if the Indian government provided clarity over FDI and security-related issues.

“A country that is looking at $300-400 billion investments must not club security with investments . It is a dangerous mix. Our company is not a security hazard to India just because we operate in Pakistan. The fact is that Hutch Essar is managed by Indians. When you have $10-15 billion investment in this country, by virtue of that you become a protector of this country,” Mr Sawiris had said.

For Orascom, the buyout of HTIL’s stake in Hutch Essar will see its subscriber base rise to 75 million (from 52 million currently), and also provide a direct footprint in the world’s fastest-growing telecom market. It will also make it the biggest telecom player in the Indian sub-continent as it already has operations in Pakistan and Bangladesh

http://economictimes.indiatimes.com/News/N...show/937393.cms

speculation speculation speculation

[amitstg 0]

better to have more and more players in the market to make it more competitive for us the customers

[vb86 0]

India's Essar offers deal on Hutch to Vodafone - paper

Thu Dec 28, 2006

MUMBAI (Reuters) - India's Essar group has met with Vodafone Group and offered a deal on the firm's planned takeover of mobile phone operator Hutchison Essar, the Times of India reported on Thursday.

The Ruia family-controlled Essar group holds 33 percent in the joint venture, and is reported to be interested in taking full control itself.

According to the newspaper, Essar has proposed that Vodafone buy only the 55 percent stake in Hutchison Essar that is directly held by Hutchison Telecommunications International to "reduce (the) financial burden" of an outright purchase.

Citing a source familiar with the Ruias' plan, the newspaper said Hutchison Telecommunications and the Ruias are working on a deal to sort out what would happen to a remaining 12 percent stake controlled by Hutchison.

The Ruias would, after a year, then encash their investment through an initial public offering, the paper said.

Essar group Vice Chairman Ravi Ruia and Vodafone Chief Executive Arun Sarin held a "courtesy meeting" in London last week, a senior Essar group official told the paper.

An Essar spokesman declined comment.

The Financial Times earlier said Vodafone had submitted a bid, valuing Hutchison Essar at between $17 billion and $18 billion (8.7 billion and 9.2 billion pounds), the same price as a reported proposal from Essar group.

http://today.reuters.co.uk/news/articlebus...HISON-ESSAR.xml

[abhay 0]

Hutch sets floor price of $14bn

As Ravi Ruia of Essar and Arun Sarin of Vodafone hunker down separately for parleys with Hutchison honchos in Hong Kong, Hutchison Telecom has put out word that it won’t even sniff at an offer that values its 67 per cent stake in Hutchison Essar Ltd, its Indian wireless subsidiary, at less than $14 billion.

This effectively puts the enterprise value for Hutchison Essar at over $ 20 billion as the bidding battle among the four players – Essar, Anil Ambani’s Reliance Communications, Vodafone of the UK and Maxis Communications of Malaysia – enters a gripping endgame this week. Orascom Telecom, which has a 19.3 per cent stake in Hutchison Telecom International and thereby an indirect 10 per cent stake in Hutchison Essar, is also hovering in the wings.

Essar has reportedly stumped up an offer that values the unit at $18 billion and will clearly need to up its bid value if it hopes to stay in the race. The Ruias have two things going for them: they have a 33 per cent stake in the Hutchison Essar and hold a crucial right of first refusal should Hutchison Telecom choose to sell its stake.

Both Ravi Ruia, vice-chairman, Essar group and Arun Sarin, CEO, Vodafone were believed to have arrived at Hong Kong with their investment bankers in tow for confabulations with senior Hutch bosses.

Officials of Essar group however, denied that Ravi Ruia was in Hong Kong. “He is very much in Mumbai,” they added.

Despite this denial, sources from the $ 15 billion group are not disputing their interest in Hutchison Essar. “The group has always said that it is interested in raising its stake in Hutch-Essar. Therefore, yes we are interested, but things are still at an early stage,” they added.

Though there are doubt in the minds of certain observers about the conglomerate’s ability to raise funds of such a magnitude to finance the deal, sources said it wasn’t all that difficult these days to raise the money.

“India is a hot market. Moreover banks are confident about the potential of Hutch-Essar in the vastly untapped Indian telecom sector. Therefore, raising funds should not be a problem,” the source said.

The Essar group is understood to have roped in Morgan Stanley as its advisor and reports say that it has got a line of credit from Citigroup and others for over $10 billion.

http://www.telegraphindia.com/1061228/asp/...ory_7193171.asp

RCL to unveil its next strategy for Hutch

Anil Ambani, the chairman of Reliance Communications will address a press conference at 4:00 pm on Thursday amidst raging speculation that he will announce his firm's next move in the battle for Hutch-Essar.

The conference will happen at Reliance Centre, Ballard Estate. Mr Ambani's move comes after submission of bids by both the Essar group and Vodafone.

International wire reports said earlier on Thursday that Vodafone, the world's largest wireless company, has made an offer to Hutchison valuing the company at $19 billion including extra costs.

http://economictimes.indiatimes.com/articleshow/965058.cms

Anil in exit mode?

Anil Sarin of Vodafone is reportedly in Hong Kong. So is Ravi Ruia of Essar. Missing from the picture is the other widely-touted frontrunner for the takeover of Hutchison Essar - Anil Ambani.

Is the man who started the whole media buzz on the takeover of India’s fourth largest mobile company now having second thoughts?

This is the question everyone is asking as the global bidding war for Hutchison Essar, the Indian business of the Hong Kong-based Hutchison Telecom International (HTIL), moved decisively into the next phase on Wednesday as Vodafone CEO Arun Sarin and Essar vice-chairman Ravi Ruia flew into Hong Kong for crucial talks, sources in the telecom industry said.

The problem, clearly, is the sticker price. On Wednesday, a Hutchison Telecom spokesperson confirmed media reports that the company would only entertain offers “well in excess of $14 billion”, which effectively sets a base price for the deal.

The Financial Times had reported from London that HTIL had “dismissed” a $13.5 billion offer for Hutchison Essar, made last week by Malaysian telecom giant Maxis Communications and US private equity firm Texas Pacific Group.

But if HTIL’s 67% stake has to be priced upwards of $ 14 billion, the whole company will cost the buyer something like $20-21 billion. Anil Ambani cannot obviously buy only the HTIL stake since the Ruias will not play second fiddle.

As the asking price for Anil Ambani goes up, the wait-and-watch game of Reliance Communications (RCom) cannot be sustained any longer. Anil Ambani, say observers, will have to walk away.

Sources close to RCom said that though the group is not short on cash, any all-cash offer of $ 20 billion or more for a 100% acquisition of Hutchison Essar will not be prudent in terms of enterprise value.

This is especially so since RCom could anyway be close to the No 1 slot looking at its current rate of subscriber growth.

“Where’s the value-add that Hutchison Essar can bring to the table for Reliance?” asks one insider. So if the hands controlling the fourth largest mobile telephony player are slated to change, then it’s for the foreign players with practically no presence in the country to make a big enough bid for Hutch.

On the other hand, strategically it makes sense for an Anil Ambani to raise the stakes for all new bidders so that entry to the Indian market becomes an expensive proposition for the new entrant.

Many analysts also point out that RCom will gain little by committing huge sums for an acquisition. “It will not make sense to eliminate a rival by swallowing it, as the move clearly does not give the acquirer any pricing power or any clout with telecom equipment suppliers,” the analyst said.

What this means is that RCom may now be preparing the ground for a quiet withdrawal, having made the entry prohibitively expensive for whoever ultimately buys Hutch. A high price-entry, however, suits the Ruias, since this will give them a high exit bonus.

Ravi Ruia is currently in Hongkong accompanied by investment bankers, including those from JM Morgan Stanley and Standard Chartered. The Essars, who as existing partners with a 33% stake in the Indian joint venture have the first right of refusal, are reported to be keen to “buy out” HTIL’s 67% stake in Hutchison Essar. As partners of HTIL, only they have the necessary clout to bring down HTIL’s asking price.

Sarin’s reported arrival in Hongkong could not be independently confirmed. An HTIL spokesperson did not return calls seeking confirmation that talks with officials in Essar or in the UK-headquartered Vodafone, which is keen to acquire a controlling stake in Hutchison Essar, were imminent.

HTIL confirmed last week that it had been approached by “various potentially interested parties” regarding a possible sale of its equity interests in Hutchison Essar, but that “there is no assurance that a sale may result from these approaches.”

A telecom analyst in a multinational financial institution said on condition of anonymity that if the reports of Sarin’s and Ruia’s presence in Hong Kong were confirmed, “perhaps it’s a sign of which way the wind is blowing.” Even if the Ruias’ reported bid for a buyout of Hutchison doesn’t go through, they may prefer Vodafone since it would mean that they will continue to “run the show” in India, the analyst said.

BNP Paribas’ senior credit analyst (Asia Pacific) Vijay Chander says that irrespective of which of the bidders was considered a “better fit”, HTIL officials were “duty-bound” to their shareholders to recommend acceptance of the highest bid. “The market will speak, and one or other bidder could even now raise the stakes,” he added.

HTIL on Wednesday effectively set a benchmark for the asset sale, confirming media reports that the company would only entertain offers “well in excess of $14 billion.

Financial Times had quoted Hutchison finance director Frank Sixt as saying that the $13.5 billion bid made earlier in December by Maxis and Texas Pacific “is not a valuation that would excite us”. (Sixt’s comments had been made prior to HTIL’s statement last week acknowledging that it had been approached by various interested parties.)

Sixt further noted that “a lot of people are interested in having an Indian asset. We have one which we are very pleased with. And really there has not been anything that would rise to the level of being an offer capable of acceptance.”

Turning point

At $20 billion, the game is no longer worth it for Reliance Communications.

But Ambani benefits by pushing up the takeover price for new entrants.

Only Ruias have some leverage on how high HTIL will let bids go.

http://www.dnaindia.com/report.asp?NewsID=1071564

Edited December 28, 2006 by abhay

[HetalDP 947]

Hutch Must got to Vodafone

The Reasons are

1. Vodafone has Strong Mussle So can Expand Network

2. Very Imminent Player in 3G in World

3. Good Experience in 3G Network will Benefit India Confumers

4. Will give tough fight to Existing Player making Healthy Competition.

5. If Reliance Grows too large we would end Getting Discount Products.

6. If Reliance took over it continue to rise the Rates for all PLans

[KumaarShah 143]

Absolutely true, HEL should not go to RCL as I have been saying this since almost a week now. RCL will become complacent, not improve network or services and charge highest going by their current shenanigans in CDMA space.

And for once, ADA seems to be doing the right thing by upping the ante for HEL to such a high level, that whosoever buys it will definitely find it unattractive to operate and hence will not be in a position to lower call rates leading to an all out war.

Enjoyyyyyyyyyyyyyyyy......

[Arun 795]

Exploring Hutch-Essar buy: Anil Ambani

NDTV Profit

Thursday, December 28, 2006 (Mumbai):

Anil Ambani has made his intentions clear regarding the Hutch-Essar bid.

Anil Ambani, chairman of Anil Dhirubhai Ambani Group, today said the acquisition of Hutch-Essar would be "good" for Reliance Communications, offers a good "inorganic" opportunity for growth and fits in nicely within the strategy of growth in the telecom business.

However, he added that it is not certain that Reliance Communication would emerge as a successful bidder. "This I believe is a strong endorsement in our company and in India's telecom growth," he said, adding that "there is no certainty on the Hutch-Essar proposal on when and how it will be completed."

"We have support from global financiers and banks and for the acquisition. We will have an enhanced focus on GSM in the future and Hutch fits well in this overall strategy," he said.

Anil Ambani was addressing the media in Mumbai a short while ago on the birth anniversary of group founder Dhirubhai Ambani.

[KumaarShah 143]

^^^

Similar news from The Hindu Business Line as follows: -

News Update as at 17.00 hrs (IST)

Info-Tech

Hutch-Essar potential acquisition target: Anil Ambani

MUMBAI: Formally throwing its hat in the ring, Reliance Communications said on Thursday that it was looking to acquire its rival Hutch-Essar and has received funding support for the proposed deal.

RCom Chairman, Mr Anil Ambani said his company had received strong financial support from leading bankers all over the world.

"This I believe is a strong endorsement in our company and in India's telecom growth," he said, adding, "there is no certainty on the Hutch-Essar proposal on when and how it will be completed." - PTI

Link: http://www.thehindubusinessline.com/busine...us/15281704.htm

So what is ADA upto now? Is he willing to buy at $20Billions or even more? Seems like what someone said earlier, 'whatever ambanis want, they are ready to pay any price'

Edited December 28, 2006 by khs123

[abhay 0]

Ruias set to offload 49% if they win Hutch-Essar

Ruias of the Essar group have got their plan B ready. Sources say the group, which has businesses spanning from steel to oil, has conveyed to the bankers that it would offload up to 49% stake to public and private equity investors in the domestic market in case they mange to win the bid.

"We have received funding from various banks including Citibank and Standard Chartered to bid for Hutchison's 67% stake in the country's fourth largest cellular company," a senior banker said.

The money raised through a public offer will primarily be used to clear part of the huge debt taken to pay Hutchison, he said.

Sources said the company is banking on the future prospects of the telecom sector which connects six lakh new customers every month. Rishi Sahai of Indusview said the subscriber base is expected to more than double to 348 million in four years from the current 143 million. Market leader Bharti Airtel, which has 30 million customers, is valued at $26 billion now.

Sources close to the company said the capital expenditure for future growth will be met from internal accruals as the Indian telecom player with 22 million subscribers is reported to post an EBIDTA of around $1 billion.

http://timesofindia.indiatimes.com/NEWS/In...show/987286.cms

Anil richer by $2 bn after Hutch talk

If you were wondering from where Anil Ambani was going to fish out that extra billion or two of dollars needed to buy out Hutchison Essar, you may do well to look at the performance of his Reliance Communications (RComm) scrip. Its robust recovery, after the market’s double jolts on December 11 and December 12, has already made Ambani richer by more than $ 2 billion, or nearly Rs 9,250 crore.

The stock’s recent run has left the Sensex way behind and has also significantly outperformed rival Bharti Airtel in the recent weeks. The RComm scrip has bounced back 16.8 per cent between December 12 and December 29, while the 30-share Sensex rose 6.1 per cent and Bharti Airtel 9 per cent.

A Reliance Communications spokesman refused to comment stating that the policy is not to comment on share price movements.

According to National Stock Exchange data, Anil Ambani controls 66.75 per cent of the company, which accounts for more than 136 crore shares of the company. The Rs 68-rise in the share since December 12 increases the value of the promoters’ stake by Rs 9,248 crore, or more than $ 2 billion, a sum that can play a critical role in the battle that Reliance is facing with British Vodafone to control Hutch Essar.

Reliance Communications’ market capitalisation will be one of the crucial factors that will be considered by financiers when they extend cash to Anil Ambani and his ADAG (Anil Dhirubhai Ambani Group) for the Hutch Essar bid.

The RComm closed 2006 at Rs 471 and is now 3.2 per cent higher than where it was on December 6, before the market faced a correction. The plunged laid everyone low, but RComm’s jump may have been aided by the news of its strong interest in buying out Hutch Essar, whose GSM mobile network fits strongly with Reliance’s desire to offer both GSM and CDMA based mobile services.

The Sensex is still to reach back the 13,972-point level reached on December 7 and is 1.3 per cent below it. Bharti Airtel, despite its 9 per cent recovery since December 12, is currently at 2.8 per cent below the Rs 646 it recorded on December 6.

The first hint of Reliance Communication eyeing a Hutch stake appeared around December 8, which was a Friday. After dropping to Rs 403 on December 12, as the news of Anil Ambani being in the fray got confirmed, the scrip raced up to Rs 466 over the next three days.

The fact that Ambani’s personal fortune has grown by $ 2 billion since the markets got a jolt in early December is expected to help in the fund raising. The prospect has got even tougher, with reports suggesting that Vodafone is pricing Hutch Essar at $ 20 billion.

VK Sharma, research head at Anagram Stockbroking said "The telecom sector will see 30 per cent year-on-year growth in the near future. If Reliance does take over Hutch, that will further change the valuations of the entire sector. The current price increase of the scrip is reflecting that, as well as the synergies that the two companies can enjoy."

http://www.hindustantimes.com/news/181_1885264,00020009.htm

[kesav 127]

NEW YORK, JANUARY 3: The battle for control of India's fourth-largest mobile operator Hutch Essar may become even more high-profile with a prospective buyer from the US telecom space joining the list of potential buyers doing the rounds.

So far, UK's Vodafone Group and India's Reliance Communications are the only two potential bidders to have made public their interest in acquiring Hutch Essar.

However, Indian partner in the joint venture Essar Group and Malaysia's Maxis Communications are also reported to have made indicative offers for the 67 per cent stake held by the foreign partner Hong Kong-based Hutchison Telecom (HTIL).

Meanwhile, there have been reports about Egypt's Orascom, Qatar Telecom and a consortium of private equity funds mulling their respective bids for Hutch Essar.

Verizon Communications, which has a market capitalisation of more than 108 billion dollars on NYSE, is the latest name being churned out by rumour mills for the prized Indian firm.

While a spokesperson of the US firm said it was the company's policy not to comment on 'this kind of speculation', industry sources said the move could be strategically important for Verizon as the US market was near a saturation level and the Indian market offers great growth opportunities.

Incidentally, Verizon Communications offers wireless services in the US through Verizon Wireless, a joint venture with Vodafone, one of the interested parties for Hutch Essar.

The Verizon spokesperson also declined to comment on queries related to whether a potential bid would be in partnership with Vodafone or could it go solo.

source :: http://www.financialexpress.com/latest_ful...ntent_id=150679

Edited January 3, 2007 by kesav

[HetalDP 947]

Now I am Tired of Reading all these

1. When the Hutch will be Sold off ???

2. When Reliance will Enter GSM - (Claiming to come in GSM from Last 6 Months) ???

How much we should wait for Rim GSM

Edited January 4, 2007 by hpnasik

[kesav 127]

Now Hindujas enter the fray...

The Hinduja group has now jumped into the fray. It has announced its interest in buying a stake in mobile phone operator Hutchison Essar Ltd, but was unlikely to settle for anything less than 51 per cent.

“We have expressed our intention to Hutchison and we are waiting for confirmation whether they want to sell the stake,” said Ashok Hinduja, executive chairman of Hinduja TMT Ltd.

“We are not interested in anything less than 51 per cent as we would like to hold a controlling stake,” he said.

source:: http://www.timesnow.tv/Sections/Sports/Hin...how/1050907.cms

[Arun 795]

Hutch plays down Ruias` first right of refusal

Business Standard / New Delhi January 5, 2007

The Hong Kong based company has denied Essar's first refusal right to potential bidders.

Taking the Ruias head on, Hutchison has made it clear to prospective bidders that it can sell its 67 per cent stake in Hutchison Essar without offering the first right of refusal to the Ruias who hold the remaining 33 per cent in the joint venture.

Sources close to Hutchison said it could sell the stake to Vodafone, foreign buyout funds or Reliance Communications and its consortium partners without having to go to the Ruias first.

They said this was possible because the shareholders’ agreement gave the Ruias the first right of refusal when Hutchison’s stake in Hutchison Essar fell below 40 per cent “and” it sold more than a 10 per cent stake to Reliance, Tatas or the Bharti group.

The operative word in the agreement was “and,” which meant that both the conditions had to be triggered simultaneously for the Ruias to have the first right of refusal. Had the word been “or” instead of “and,” the situation would have been different, the sources added.

Thus, as the second clause would not be triggered, the agreement left Hutchison free to offload its entire 67 per cent stake to Vodafone.

This interpretation has obviously been questioned by the Ruias. A spokesperson for the Ruias said the whole issue was a matter of interpretation and their interpretation was totally different from that of Hutch.

A Hutchison spokesperson in Hong Kong said, “On matters related to the shareholders’ agreement, we prefer not to comment publicly.”

He declined comment when asked if the Ruias had contested this interpretation of the shareholders’ agreement that did not grant them the first right of refusal.

Reliance Communications, the sources added, could get round the agreement conditions by picking up less than 10 per cent of the Hutchison stake, while the remaining was bought by buyout funds like Blackstone, Carlyle Group, and KKR, which are supporting the company in its bid.

In this case, only the clause of Hutchison’s stake falling below 40 per cent would be activated, while the second clause against Reliance having more than 10 per cent stake was not, again denying the Ruias the first right of refusal.

Both sides have taken legal opinion on the issue.